ISS noted that Zoom shares dropped nearly 17% the day after the company’s earnings report on Aug. 30., where Zoom’s outlook was below Wall Street estimates and sales growth was slowing. As a result, ISS said that the original offer implied an offer of $200.28 per Five9 share, whereas the current exchange rate implies $155.72 a share.
On Friday, Zoom shares opened at $279.79, while Five9 shares opened at $172.55. At those prices, Zoom’s deal values Five9 at $154.81 per share.
While Five9’s board recommends the deal, ISS feels that shareholders aren’t getting a fair shake, noting that during negotiations, “the parties appeared to agree that FIVN’s takeout value was around $210 per share.”
“The rationale for the transaction appears sound, particularly given the complementary nature of FIVN and ZM’s offerings, and the fact that the combined company would have access to a much larger addressable market,” ISS said in a report. “However, the all-stock deal exposes FIVN shareholders to a more volatile stock whose growth prospects have become less compelling as society inches towards a post-pandemic environment.”